Paying for Paving

Tax driving, not gas.

Ike Brannon

August 11, 2014, Vol. 19, No. 45

Everyone involved in the Kabuki theater surrounding the nine-month extension of revenue for the highway trust fund has so far played their parts perfectly.

The secretary of transportation told the media that he would be forced to reduce funding to the states if Congress failed to replenish the fund before recess, even going so far as to put a countdown clock on the DOT website showing the time remaining until highway construction runs short of money. Various governors loudly objected to the prospect of having to pause highway construction in the middle of the summer. The president feigned leadership by demanding Congress pass a bill.

Predictably, Congress dragged things out to the last minute but was on the verge of passing a short-term extension of the highway bill as this magazine went to press. It takes a few billion from the general fund to make up for the shortfall in revenues from the gasoline tax, paid for by some dubious accounting maneuvers. In a few months, the theater will reopen and stage the same show.

The reason that passing a transportation bill is so much more complicated than it was a decade ago is that federal gas tax revenues have been in decline as people drive less and in more efficient vehicles. Today, the federal gas tax does not generate enough money to pay for the level of road spending Congress would like to have.

For the last few years, Congress has dipped into the general fund to supplement the gas tax. But Congress has just about exhausted its list of “pay-fors” necessary to cover this expenditure in a budget ruled—more or less—by a “pay as you go” rule.

Both sides would like to have more transportation spending. All politicians are Keynesians to some degree, and a new bridge is one of the few manifestations of government that the populace sees as unambiguously good. But few in either party are willing to openly contemplate an increase in the gas tax, which almost no one in America seems to welcome.

There is a way out of this impasse—not one that could be hatched and made into law in the next couple of weeks, mind you, but a radical reform that could lead to both a more equitable and economically efficient way to finance the roads. It would also reduce the need to build or expand roads.

The answer is to scrap the gas tax and go to a market-based method of financing roads. It could take various forms, but the most efficient way to do this would be to put transponders in cars and charge people based on when and where and how much they drive.

While the notion that something this radical could gain widespread political acceptance might strike some as a fantasy, such a change would offer something for everyone.

For the masses who get stuck in traffic jams on a daily basis commuting around urban centers, it offers a way to lessen congestion. Instead of a flat fee per gallon of gas, this would charge people more money if they’re driving on a congested road. Higher road prices will give drivers a greater incentive to travel when it’s not congested, and traffic would be spread out more evenly over the day. People’s anger at paying a daily toll would be partly assuaged by not having a gas tax, as well as getting some of their day back.

Environmentalists would welcome such a change because congestion is the main cause of smog. If we were largely able to eliminate traffic jams we would see a dramatic improvement in air quality in major cities. It would also lessen the need for road construction, since the existing traffic would be distributed more evenly over the course of a day.

Conservatives might come to embrace a system that takes what is essentially treated now as a collective good and creates a market with which to allocate it. Indeed, many already have. In 2004, when the Bush administration proposed taking a few tentative steps towards tolling, there was pushback from within the small-government conservative community, the argument being, essentially, that a toll was money going to government and that this amounted to a tax increase—and therefore needed to be opposed.

But people like Grover Norquist came to the defense of a tolling regime, recognizing that it represents people paying for something provided by a government and beats a gas tax hands down. If a toll is a tax, then should we oppose admission prices to national parks, or the sale of tickets to sports stadiums built by taxpayer dollars?

Rural denizens and their politicians would benefit from such a regime because they would potentially pay less to drive, living in areas with little congestion.

Tolling would also be more progressive, since the poor tend to use mass transit and are more likely to live and work in central cities. To be sure, progressives would seek to get more money generated from the vehicle miles fee allocated to mass transit, but there’s no reason to think they would oppose such a move.

The major stumbling block that has to be addressed before an ambitious Congress springs this on the populace is the privacy issue. A system that records when and where people drive will generate an immense amount of data, most of which we’d rather not let other branches of the government see.

Jim Harper, a senior fellow at the Cato Institute and an expert on technology and privacy issues, thinks such a system could be created. He suggested that a workable system would need to destroy the data used to charge drivers shortly after they receive and pay their bill, and that the software would need to be open-sourced, so software engineers could verify that the system was indeed doing what it is supposed to be doing with the data.

Of course, convincing such disparate groups that this radical change serves their priorities would be no mean feat. And a small minority of recalcitrants could make such a transition impossible.

It is difficult to conceive of a government that struggles to deal with even minor, routine matters coming to an agreement on a fundamental change in how we fund most of our transportation system. But it’s not impossible to see people eventually warming to such a system. That is the normal course of opinion any time a government introduces a funding mechanism that operates akin to a genuine price system for roads. California did such a thing when it opened SR-91 in 1995, funded by a toll that increased with the road’s congestion. While it was greeted with widespread outrage, the emotion quickly dissipated as drivers across Riverside County began to appreciate the ability to avoid traffic.

And various congestion pricing schemes exist throughout Europe and Asia, nearly all of which quickly become welcomed by drivers. The supposedly statist countries of Europe have been much more accepting of market mechanisms to reduce congestion on the roads.

What’s true for Southern California and Europe doesn’t necessarily hold for the rest of the country, of course, but funding roads via a vehicle miles fee would work much better than what we currently have in place.

Meanwhile Congress continues to struggle merely to patch together the broken highway financing system a few months at a time. That no one can even broach a reform serves as yet another manifestation of a political process that is just as broken.

Ike Brannon, a senior fellow at the Bush Institute, is president of Capital Policy Analytics, a consulting firm in Washington.